I setup company A. You setup company B and Kevin sets up company C. We each capitalize our companies at say $500k. For the first year we swap dollars, i.e. I buy $100k of stuff from you, you buy $100k from Kevin and he then buys $100k from me. We all make a loss of $50k which covers our expenses, ie the amount we pay ourselves.In the second year we all experience explosive 200% growth and are now have $300k annual revenue. We still loss $50kIn the third year we once again grow at 200% and now have $900k of revenue.

I then list my company which has experienced 200% annual growth and is almost showing a net profit, a small $50k loss on $900k revenue.I sell 49% of the company for $500k.

In the fourth year growth continues and we all have $2.7M in sales.As I'm such a great CEO I give myself 10% of shares as options.I then offer to buy KitKat's company for $3M. I get the money from the bank or a secondary placement, as growth has been so good people are willing to fork money over. If not I use stock.

I then tighten up on expenses as I no longer have to buy from KK and I just sell to Kevin. In the fifth year growth slows but profitability explodes with huge net margins. I then buy Kevin's company for stock.

While I started out with no product I have over five years managed to build something slightly credible and with really good story, hey there may even be some value.

Kevin and I then sell off the rest of our shares, but we continue to manage the company granting ourselves stock options.

Whatever we were doing may or may not have value now, but we don't really care.

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